56.5% of public contracts tendered through North Karelia’s Procurement Services were awarded to local suppliers, and the value of these contracts exceeded EUR 196.5 million. SMEs accounted for 87% of all contracts concluded, which is 30% higher than the European average. If the share of procurement contracts with North Karelian entrepreneurs were increased by 10% from all sectors, the multiplier effects in monetary terms would have been more than EUR 330 million and the employment impact would have been more than 3030 people. These regional economic impacts can be seen in a study commissioned by Business Joensuu, which examined the development and multiplier effects of public procurement in North Karelia.
In 2019, public procurement was put out to tender for EUR 348 million through North Karelia Procurement Services. According to the research results, 56.5% of the value of these contracts was awarded to local suppliers. Awarding contracts to local entrepreneurs has a significant impact on the growth of companies and thus also on the regional economy. Multiplier effects almost double the economic significance. For example, increased demand for plastic products affects entrepreneurs in the sector through further purchases of raw materials and intermediate products, such as chemicals, electricity, water, and by purchasing labour from households. In other words, by means of multiplier effects, the money ‘flows’ to the rest of the regional economy.
Multiplier effects vary greatly by sectors. The biggest multiplier effects arise in the production sectors, such as the wood industry, the food industry and the manufacture of other machinery and equipment, where demand of EUR 1 million produces a multiplier effect of about EUR 1.9 million in each sector.
When procurement contracts were concluded with North Karelian entrepreneurs for EUR 196.5 million in 2019, multiplier effects amounted to more than EUR 308 million. At the same time, more than 2,800 jobs were created.
‘Public procurement offers opportunities for even greater impacts on the regional economy. If the share of procurement contracts with North Karelian entrepreneurs were increased by 10% from all sectors, the multiplier effects in monetary terms would be more than EUR 330 million and the employment impact would be more than 3030 people. In other words, approximately EUR 22 million and 210 more people than now’, says Pinja Konttinen, a business expert specialising in public procurement from Business Joensuu.
‘Companies should also have more courage to submit tenders for public tendering and, for example, make use of the possibility of making an offer as a consortium. There is a clear need for this especially in the food industry, where the share of competitions won by SMEs was only about 33%’, Pinja Konttinen continues.
However, due to the economic structure of the region, it is not possible to make public procurements in all sectors from local companies.
‘But there are opportunities here. We want new companies to be located in the region to complement local supply. In this way, we could bring new local operators within the scope of competitive tendering. This, in turn, has a positive impact on the regional economy, as the euros remain in circulation in the region. In public procurement, there is also a great opportunity for the development of local business, as they can be used, for example, to create new innovations created through demand’, explains Service Director Tuomo Roivas from Business Joensuu.
Information on public procurement is based on a study examining public procurement tendered in 2019 at the national and EU level through North Karelia Procurement Services. The Master’s thesis made by Pinja Konttinen was completed at the University of Eastern Finland in December 2021.
Link to the study: https://erepo.uef.fi/handle/123456789/26693
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